The FCA has released its latest consultation paper affecting the Claims Management Industry.
Since taking over the regulation of claims management companies (CMCs), the FCA has published:
'Dear CEO' letters on financial promotions and acting for customers (June 2019) and the importance of carrying out due diligence to ensure the validity of claims (October 2019);
A joint statement with the Information Commissioner's Office (ICO) and the Financial Services Compensation Scheme (FSCS), handling personal data and directing consumers to FSCS (February 2020); and
A portfolio strategy letter, which sets out the potential harms that CMCs could cause along with supervision strategies for dealing with them. This followed a comprehensive analysis of the portfolio.
Its current focus is on preventing phoenixing by Claims management firms. This occurs when an individual connected with a dissolved financial service (FS) firm reappears in connection with a claims management company (CMC). The FCA’s view is that this enables a firm to benefit from the former FS firm’s poor conduct by carrying on claims management activities against it.
Preventing phoenixing will:
Encourage public confidence in the regulatory system and the integrity of the market will be undermined
Ensure firms will be incentivised to act against the interests of their customers
Allow CMCs who have not benefited from phoenixing to not suffer a competitive disadvantage
This applies to:
Current and former FS firms who carry on activities that are protected by the Financial Services Compensation Scheme (FSCS)
Current and prospective CMC firms carrying on claims management activity for claims about financial products and services that are protected by the FSCS
The consultation deadline is 21 June 2021.
Reach out to MEMA if you have any questions around what this means for your business.